Useful Books and Other Resources
As you will have surmized from the other pages on this site, we offer a specific perspective on investing. This perspective is generally unlike any of those that you will encounter in general interest discussions. To put it simply, we have a focus on the use of models or analytics in investing and trading applications. We are not alone in this regard, and have put together a list of the best and best-known titles that deal with these topics.
Against The Gods is a very good and readable account of the history of risk management, and to a large extent the history of models applied to judge risk and return in investing.
A Random Walk Down Wall Street is the best known presentation on the theory of efficient markets, which means the theory that the evolution of capital markets is a random process and is not forecastable. The ideas within this book form the underpinnings of what most casual investors think about how markets move. The basic concept is that investors cannot gain an advantage from better information and that the investor is compensated with higher returns only for risks that cannot be diversified away. This is a classic of investment theory and was responsible for bringing some key academic concepts to the lay audience. This said, we fundamentally disagree with the efficient markey hypothesis that the book espouses and which is now agreed to be fatally flawed--see below.
A Non-Random Walk Down Wall Street is the quantitative answer to Burton Malkiel's classic. Ths book present a wide array of evidence that equity markets are not efficient and can be forecasted. Unlike Malkiel's book, however, this book is no generally understandable by the lay reader--which is unfortunate.
An introduction to Behavioral Economics
Searching for Certainty is not particularly well-known but provides, I believe, one of the cleanest and most readable discussions of how we know that capital markets are not efficient and can be forecasted. This book is not just about equity markets, but looks generally at issues of predictability and how well our forecast models perform in a range of applications.
If you want to understand the basics of leading indicators as they are traditional applied in economic, this book provides a good basis.
Value at Risk by Jorion is a classic text in risk management and presents a series of key concepts associated with risk management applications. That said, this book is a starting point.
Heuristics
One of the most important and least widely understood issues in trading and risk management is the impact of heuristics on the way that people make decisions. Kahneman (and his longtime associate Tversky) laid the foundation of behavioral economics with their work on heuristics. Both of these books make for a fascinating read.
Consulting and Professional Services
General Interest Investment and Finance
The fascinating story of the largest-ever collapse of a hedge funds--a failure so spectacular that it threatened many of the largest banks in the U.S. Even pros don't necessarily manage risk properly.
